Buy Senco Gold Ltd for the Target Rs.500 By Emkay Global Financial Services Ltd
H2 ask rate undemanding; steep discount unwarranted; Buy
We reiterate our positive stance on Senco, buoyed by the strong growth pick up during festive (56% growth in Oct-25), growing franchisee interest in non-core territories, and inexpensive valuation (16x/13x FY27/28E EPS). While high rainfall and base likely impacted the Q2 topline (up 2.5%), Senco delivered a 54% EBITDA beat, helped by a ~350bps EBITDA margin expansion (YoY). Given the ~25% topline growth in 7MFY26, FY26 guidance demands only ~10% topline growth in rest of FY26 and ~6% EBITDA margin in H2 (vs 8.6% in H1). We also see emerging franchisee traction in non-core regions as a step toward strengthening Senco’s standing as a pan-India brand. Senco has added 4 franchisee stores in non-core regions/7 franchisee stores overall in 1H. While large spikes in gold price are stretching the balance sheet across jewelry retailers, Senco managed to do well with better credit terms from vendors in H1; net debt-to-equity was at ~0.8x for Senco vs ~1.1x for TTAN (standalone). We expect Senco to deliver normalized revenue/PAT CAGR of 19%/26% over FY25-28E. Despite a robust growth outlook, Senco is currently trading at 30- 70% valuation discount to other jewelry retailers (Exhibit 5). We retain BUY on the stock as well as our TP of Rs500 (25x Set-27E EPS).
EBITDA beat led by strong gross-margin performance
Senco delivered a muted revenue growth of ~2.4% in Q2, likely impacted by the unprecedented rains in its core eastern market, gold spikes, and a high base. However, Senco has more than recouped the sales it lost in Q2, with 56% growth in Oct-25. Senco added 5 new jewelry stores in Q2FY26 (3 franchisee, 1 company-owned, and 1 international), taking the total store-count to 184 (excl Sennes stores). Further, the management retained its guidance of opening 20 stores in FY26, with a higher tilt toward the franchisee model (vs previous outlook of 50-50 expansion). On profitability, EBITDA margin stood at 6.9% in Q2 vs 3.5% last year, aided by gross margin expansion of ~600bps to 17%, likely increase in making charges, better studded mix, and relatively lower hedging mix in Q2. With a strong margin performance in H1 and ~25% topline growth in 7MFY26, Senco’s outlook of delivering 18-20% topline growth, 6.8-7.2% EBITDA margin, and 3.5-3.7% PAT margin in FY26 is not demanding. Our estimates bake in the top-end of the topline outlook and the mid-point of the margin outlook.
Strong festive traction despite record high gold prices
Senco delivered its highest-ever festive sales in Oct-25, with revenue exceeding Rs17bn – a robust 56% YoY growth, led by 60% value growth in gold and 32% in diamond value sales. Despite record-high gold prices, Senco registered positive volume growth across categories (Gold: +4%, Diamond: +5%, Silver: +8%). The strong performance was driven by new design launches, introduction of 9-karat jewelry, and attractive festive offers such as flexi advance booking and the jewelry purchase scheme. With gold prices up ~43% YoY, Senco’s focus on accessible lightweight jewelry has helped sustain demand in the festive season, as its product mix caters well to value-conscious consumers.
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